CESTAT, NEW DELHI BENCH
Commissioner of Central Excise, Indore
FINAL ORDER NO. ST/A/220 OF 2012-CUS.
APPEAL NO. ST/376 OF 2007
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D.N. Panda, Judicial Member
Revenue came in appeal being aggrieved by the First Appellate Order holding that the services of supply of manpower and security services involving reimbursement of expenses shall not form part of the assessable value in respect of taxable services of clearing and forwarding service provided by the appellant.
2. Ld. Representative for the Revenue submits that the expenses which are essentially required and integrally connected with the service of clearing and forwarding and can not be disintegrated to make the services performable that shall not be excluded while determining taxable service. Decision of Adjudicating Authority was ruled out by the First Appellate Authority for no good reason. Therefore, adjudication order may be restored.
3. Shri R. Nair, Id. Representative for the assessee submits that the law is clear about no inclusion of expenses to the assessable value. Therefore, the respondent did not include the expenditure incurred for manpower and security services provided. It was grievance of the respondent before the Appellate Authority that in case adjudication is upheld, the respondent is entitled to the benefit of Cenvat credit. That was specifically pleaded in paragraph (viii) of the First Appellate Order because the Appellate Authority allowed the appeal in toto. That particular point was not specifically dealt by the order appealed. It was also submitted by the respondent that it had filed respective balance sheets and returns before the authorities and there was no suppression made. Therefore, penalty cannot be imposed when the law was in a debatable stage.
4. Shri Amresh Jain, Id. Departmental Representative relies on the decision of larger Bench in Sri Bhagavathy Traders v. CCE  33 STT 1/13 taxmann.com 83 (Bang. – CESTAT) holding reimbursement of expenses shall form part of assessable value.
5. Ld. Representative for the assessee repeatedly prays that if at all liability is determined, it should be re-quantified granting benefit of Cenvat credit and waving penalty.
6. Heard both sides and perused the records.
7. We have no disagreement to hold that expenses incurred to provide taxable services shall be part of assessable value with such expenses are inseparable and are integrally connected, the performance of the taxable services. Such expenses shall necessarily form part of the assessable value. This has been consistent view of the Tribunal in several cases on this count. Larger Bench of the Tribunal in the case of Sri Bhagavathy Traders (supra) which has been cited by the ld. Representative for the Revenue has held that expenses which are connected with providing taxable services shall be taxable. Therefore, respondent is not entitled to any relief on account of expenses not disputed for inclusion while determining assessable value.
8. Permissibility of Cenvat credit is subject to verification and decision of lower Authority while determining the ultimate quantum of demand of service tax. Since the claim is to set off Cenvat credit against liability incurred,? who shall lead entire evidence before the Adjudicating Authority, to support its claim and satisfy him. Accordingly holding assessable value shall include reimbursable expenses, matter needs remand to consider Cenvat issue.
9. No doubt, law was in debatable stage and the matters travelled to the Larger Bench for reaching to finality. Consequently, there shall be no penalty under Sections 76 and 78 of the Finance Act, 1994. By this, we do not say that mere filing of balance sheet and return amounts to disclosure of the fact to the Revenue Authorities.
10. In view of the above, Revenue succeeds partly to the extent indicated above and the matter goes back to the Adjudicating Authority for re-determination of the quantum of tax payable deciding Cenvat issue afresh by a reasoned and speaking order.